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Minutes for HB2395 - Committee on Taxation
Short Title
Requiring marketplace facilitators to collect and remit sales and compensating use taxes, transient guest taxes and prepaid wireless 911 fees and providing nexus for certain retailers that make sales in Kansas.
Minutes Content for Tue, Mar 16, 2021
Adam Siebers, Assistant Revisor provided an overview for HB2395 stating the bill required collection and remittance of sales, compensating use tax and transient guest taxes and prepaid wireless 911 fees by marketplace facilitators with sales subject to tax. (Attachment 2)
In response to a question regarding Page 4, Section D, Line 26 of HB2395, Mr. Sieber explained it prevents individuals from being able to file a class action lawsuit against a marketplace facilitator. If there is over payment of sales or use tax collected by the marketplace facilitator it protects the facilitator from a class action lawsuit.
Kathleen Smith, Kansas Department of Revenue provided the fiscal report for HB2395 indicating it would increase state revenues by $51.5 million in FY2022. Of that total, the State General Fund is estimated to increase by $43.1 million in FY2022 while the State Highway Fund is estimated to increase by $8.4 million in 2022. To implement HB2395, the Department will require $290,972 from the State General Fund to modify the automated tax system.
In response to a question, Ms. Smith stated the $100,000 de minimis provision in HB2173 applies to both remote sellers and the marketplace facilitator. The de minimis affects the remote sellers and the average difference would be a reduction of around $9.0 million.
Proponents:
Michael Hale, Deputy General Counsel, Kansas Department of Revenue testified as a proponent for HB2395 stating this was a recommendation of the Governor's Council on Tax Reform that addresses the collection of compensating (use) tax on sales made by marketplace facilitators. He noted HB2395 shares many of the concepts and provisions that are in SB50 and HB2173 submitted by the Kansas Chamber. HB2395 is similar to the (2020) HB2657 which died due to the pandemic. HB2395 uses the same language that has been largely agreed to by the Chamber, industry and the Department of Revenue. HB2395 stays to the principles of the Retailers' Sales Tax Act, provides cleaner, more concise language, eliminates unnecessary sections that do not apply, and enhances the collection of legally due taxes which is supported by the Tax Foundation and Chamber. (Attachment 3)
Mr. Hale stood for questions from Committee members.
Trey Cocking, League of Kansas Municipalities testified as a proponent for HB2395 requiring marketplace facilitators to collect the state and local retail and use tax, and other fees; and remit the tax collected to the Kansas Department of Revenue. State, cities, counties, and Kansas businesses are impacted by the loss of sales tax due to remote sales. Remote sales are expected to continue increasing, while brick and mortar sales continue to decline. The current sales tax structure will see declining revenue if remote sales are untaxed. (Attachment 4)
Mr. Cocking stood for questions from Committee members.
Written testimony was submitted by the following as proponents for HB2395.
Emily Fetsch, Kansas Action for Children (Attachment 5)
Michael Koss, Attorney, City of Overland Park, Ks. (Attachment 6)
Opponents:
Eric Stafford, Kansas Chamber of Commerce testified as an opponent to HB2395 provided a summary of US Marketplace Facilitator laws showing the states transaction dollar amount and the threshold they have in place. He noted South Dakota's threshold is $100,000 in sales or 200 transactions and if there are 200 transactions for $30,000 worth of sales, the marketplace facilitator would be obligated to comply with the law. He noted there are two concerns that HB2395 is missing the safe harbor threshold to exclude those who transact only limited business in the state; and beginning on and after July 1, 2021, the collection and remittance obligations of a marketplace facilitator under this act also apply to any other taxes and fees that could expose retailers to unknown liabilities. Mr. Stafford noted the Kansas Chamber introduced SB50 and HB2173 with support from the retail industry and language from the NCSL model legislation and recommends the Committee reject HB2395. (Attachment 7)
Mr. Stafford stood for questions from Committee members.
Chairperson Smith closed the hearing on HB2395.
Meeting adjourned at 4:45 pm
